You are here

executive compensation

SCMF Execs Share the Pain. Not AIG

Adam Rust's picture

Posted May 17, 2011

The directors of Southern Community Financial (SCMF) have taken an unusual step in their response to the financial crisis by reducing their own pay packages.

Executive compensation should be designed in such a way that directors share in the pain, and not just in the gain.

SCMF is breaking with the status quo in doing that. All kinds of financial companies have gone ahead with huge compensation packages for their brass, even as their share prices cratered. While this is a story with a certain populist appeal, shareholders are the real losers. Compensation systems don't work and there is little that can be done as long as boards maintain their current practices for nominating and electing.

I am going to contrast the decisions by SCMF, a small bank from Southeastern North Carolina, with AIG. AIG is

FDIC Offers Solution for Bank Compensation

Adam Rust's picture

Posted January 14, 2010

The FDIC has weighed in with a new proposal that would align bank executive compensation to risk and speculation. The announced Advance Notice of Proposed Rulemaking (ANPR) attempts to strike a balance between the banks and the widespread populist anger out on the street.

The FDIC standard proposes two principles: First, it would force executives who oversee financial to sit on their shares if they pursue risky lending practices. Secondly, it would require insured instititions to increase their payments into the Deposit Insurance Fund (DIF).

The full proposal is here (pdf).  The ANPR lays out principles, but it falls short of specificity.  That is what an ANPR is all about.  It is a procedure to solicit opinion from the public before enacting a new rule.

Subprime Comes Home to Haunt Morgan Stanley

Adam Rust's picture

Posted October 12, 2009

Morgan Stanley jumped into the subprime mortgage market in 2006.  Now, they are getting burned.

We recently met in New York with representatives from a number of their departments.  Their servicing staff was there for Saxon Mortgage.  Morgan Stanley purchased Saxon in 2006 for $704 million.  Saxon has been a "leading" subprime lender and servicer.

Morgan Stanley has already been hurt.  In November 2007, they wrote down $3.7 billion in U.S. subprime assets. At

Lake City Bank: It's All About Us

Adam R.'s picture

Posted April 14, 2009

Lakeland Financial, an Indiana holding company for Lake City Bank, is remarkably consistent in its approach to the community and its shareholders.  In both cases, the approach seems to be that they are "just not that into you."

Lakeland is a state-chartered commercial bank with $2.7 billion in assets, located in Warsaw, Indiana. Both the firm's executive compensation policies and its service to the community leave a lot to be desired.

New Cap on Executive Salaries

Adam R.'s picture

Posted February 5, 2009

The next round of stimulus payments will include a cap on executive pay of $500,000. There can be no large severance packages, either.  Individuals can receive stock options, but they cannot exercise them until the federal government's preferred stock has been bought back.

The news has emphasized that payments will not be curbed for firms retroactively.  Instead, only firms that take another round of TARP funds will have to honor these restrictions.

This seems like a decision rooted in politics.  You have to state that the banking industry is pretty much unable to defend itself. 

Subscribe to RSS - executive compensation